This morning’s data showed that monthly retail sales bounced back in April, suggesting an uptick in consumer demand leading the Pound to breach the 1.56 mark against the US Dollar. Yesterday’s minutes of the latest BoE policy meeting also suggested a positive mood among policymakers as they expect British economic growth to improve in the second quarter.

In the Euro zone, the preliminary manufacturing PMI data surpassed market estimates in May, thereby providing some support to the Euro against the greenback. Across the Atlantic, market focus will be on weekly jobless claims, existing home sales and manufacturing activity data for further direction to risk appetite.

Pound Sterling – UK Markets

Following a surprise fall in March, Britain’s retail sales recovered more than expectations for April as an unusually warm weather encouraged shoppers to bring forward summer purchases. Improved consumer spending along with rising wages are likely to boost hopes of a recovery in the nation in the second quarter. Post the release of the data, the Pound has extended gains against the US Dollar.

Yesterday, Sterling traded higher against the major currencies after the minutes of the most recent monetary policy meeting showed that BoE policy makers expect economic growth in the UK to pick up pace in the second quarter following a soft start to the year. The BoE minutes showed that all nine members voted to keep interest rate steady at 0.5%, while two officials stated that the policy decision was finely balanced between voting for a rate rise and keeping borrowing costs unchanged.

US Dollar – US Markets

The US Dollar traded broadly lower against its key peers yesterday. While the latest Fed minutes offered nothing new on when the Fed would likely move on interest rates, the minutes offered hints that the central bank is unlikely to begin raising interest rates in June. Policy makers indicated that they would not start raising interest rates until a further improvement in the labour market and confidence that inflation would move towards their 2% target. The FOMC reiterated that the decision regarding the direction of the interest rates will be data driven, and it also noted that much of the weakness witnessed in the first quarter was due to transitory factors. The minutes indicated that the Fed is optimistic of a rebound in economy in the second quarter.

The US Dollar has continued to trade lower against its key peers this morning. Traders will now shift their focus to the weekly jobless claims, home sales and the Fed’s manufacturing survey data of specific regions in the US. Going forward, tomorrow’s CPI data will be closely watched, given its influence in determining the Fed’s monetary policy stance.

Euro – European Markets

The Euro lost ground against the Pound in yesterday’s trading session after politicians from the Greek’s leading governing party warned that Greece would not be able to repay a loan to the IMF, due early next month, unless a deal is made with its international creditors to unlock bailout funds.

While fears about Greece leaving the Euro zone persists, traders have now shifted their focus to the preliminary services and manufacturing PMI data of the single currency region that came out earlier in the day. The latest manufacturing reading from the Euro zone came in slightly higher than market expectations, while German factory activity slowed more than estimates. Additionally, the services activity in the Euro Zone slowed for May. Going forward, investors are expected to remain cautious in regards to the outlook for economic growth in the Euro zone when the benefits from lower oil prices and weaker Euro begin to fade. Post the release of the PMI numbers, the Euro is trading on a stronger footing against the US Dollar.

Other Currencies – Highlights

Extending its recovery, the New Zealand Dollar is trading higher against the US Dollar this morning. The Kiwi Dollar has moved above the 0.72 mark against the greenback, following the dovish minutes of the last US Fed meeting minutes which dragged the US Dollar lower against a basket of major currencies yesterday. Meanwhile, currency traders seemed to have shrugged off the New Zealand budget release that showed a deficit instead of a surplus as forecasted last year. The New Zealand government stated that it failed to meet expectations due to low inflation led by deterioration in diary prices that weakened economic growth in the nation. The government representative revealed that surplus will return next year and real GDP growth is expected to average 2.8 % in the next four years after it slowed to 2% earlier this year.

In the session ahead, market participants will now keep a tab on a string of economic releases in the US, including weekly unemployment claims, manufacturing and home sales data, for further direction in the pair.